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According to recent to recent media reports: USA has accused China of currency devaluation to promote in exports'. In the light of the given media report comment., how exports can be promoted through the Currency devaluation? (b) What is meant by Curreny Account Deficit(CAD) and Current Account Surplus (CAS)? State theri significance |
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Answer» Solution :(a) USA has a valid point argumentasdevaluationof currency encourages exports of a country. As exported goods become cheaper in theinternationalmarket givingacompetitive edge for the goods of domestic country (China).Devaluation of thevalueof domesticcurrencypromotesthe exportsof the countryandmayadverselyimpact theproductionand SALE of importingcountry (USA). (b) Current Account Deficits (CAD) is a situationthat ARISES whenthereceiptson currentaccountare less than the payments on current account. In simple words, Current Account Deficit (CAD) arises when the VALUE of exports of good send services,is lessthanthe value ofimports of goodand services.CurrentAccordingsurplus (CAS) arises whenthe value ofexportsof goodand servicesis more thanthe value of imports of goods andservices.CAD signifiesthat thenation is a BORROWER from restoftheworld, whereas, CAS signifiesthat the nation is a lender to the rest oftheworld. |
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